Question

2. Determine the future value amount of $400 invested at 6% per annum compounded quarterly for three years and five months. 3. A demand loan of $10,000 is repaid by payments of $5000 in one year, $6000 in four years, and a final payment in six years. Interest on the loan is at 10% per annum compounded quarterly during the first year, 8% per annum compounded semi-annually for the next three years and 7.5% per annum compounded annually for the remaining years. Determine the fina payment?

Answer 1

Question 2:

As the interest rate is compunded quarterly, lets convert the complete question into quarter:

• Rate per quarter = 6%/4
• Number of quarters = 3 years 5 months = 10.25 quarters
• PV = $400

Using the FV formula in excel, we get:

fix =FV(6%/4,10.25,-400) C D E F G H J K L M 5,,-400) Function Arguments ? х FV = 0.015 Rate 6%/4 Nper 10.25 10.25 Pmt = number -400 Pv4001 Type = number = 465.947434 Returns the future value of an investment based on periodic, constant payments and a constant interest rate. Pv is the present value, or the lump-sum amount that a series of future payments is worth now. If omitted, Pv = 0. Formula result = 465.947434 Help on this function OK Cancel

Hence, FV = $466